The retail electricity market in Ohio, USA, where consumers can choose from a range of energy providers, has fewer bargains than cost-increasing offers, researchers have found. In other words, consumers do not get retail choice offers for electricity that save them money – they mostly get the opposite.
Over the last ten years, 72% of the most commonly selected retail electricity plans were priced substantially higher than the default rates consumers would pay if they chose not to search for alternatives, a new study found.
The researchers, Noah Dormady, William Welch, Yufan Ji, Stephanie Pedron, Abdollah Shafieezadeh, Alberto Lamadrid, Matthew Hoyt, and Samantha Fox, wrote about their study and findings in the peer-reviewed Journal of Critical Infrastructure Policy (citation below).
According to the study results, the deregulated electricity market is rife with market failures, said lead author Noah Dormady, who is an associate professor at The Ohio State University’s John Glenn College of Public Affairs.
Prof. Dormady explained:
“The bulk of the offers provided to Ohio consumers are way above what those consumers would pay if they did nothing.”
“Historically, consumers would be better off if they just stayed with their electrical utility’s default price, rather than switching service to the median retail choice offer.”
“It’s unfortunate that cost-saving offers have been so few and far between.”
Study Has Relevance Globally
Although the study was done in Ohio only, the authors say that it has relevance across the whole United States. In fact, it even has relevance abroad where similar retail choice marketplaces have been around for several years.
Prof. Dormady said:
“The problems we document here exist in other states and in parts of Canada and Australia, too. We are continuing the work we did here in other states to learn more.”
In this study, the research team compiled an extensive and highly detailed database of retail electricity offers, analyzing over 2 million records spanning a nine-year period from 2014 to 2023.
This comprehensive effort represents the largest published dataset of its kind, providing deep insights into the pricing patterns and behaviors of retail electricity marketers in Ohio.
If your household is in Ohio and you can’t or choose not to shop around for an electricity provider, you stay with your utility’s default service. This does not apply to areas where local governments negotiate electricity rates through municipal aggregation programs.
Ohio has six major utility service territories. If you decide to look around for the best deal, you can choose from up to fifty different electricity suppliers in each territory.
Electricity Market Choices Overwhelming
Whether you purchase your electricity from a competing supplier or stay on the utility’s default service, you continue to receive distribution service from your local utility.
Prof. Dormady said that consumers were overwhelmed with choices. Between 90 and 150 different electricity supply offers are filed by approximately 45 different suppliers with Ohio’s Public Utilities Commission.
There are various types of offers, with some companies offering variable rates while others provide a fixed rate for a predetermined period.
Some ‘gimmicky’ offers include deceptively low initial costs combined with high monthly fees and consumption caps. In this context, a consumption cap means that if your usage exceeds a certain amount, your electricity rates will jump, or you may face financial penalties.
Expensive Alternative
According to the researchers, companies offering a 12-month fixed rate—the most popular choice among households—charged more than the default utility standard offer 72.1% of the time.
What’s more, their findings showed that competing suppliers historically made offers that were, on average, 25% to 30% more expensive than the standard offer.
However, when savings were available, the offers were only 5% to 10% lower than the standard rate.
Prof. Dormady said:
“The savings are considerably smaller than the price increases they offer.”
Prof. Dormady pointed out that all the competing suppliers purchase their energy from the same wholesale electricity markets.
According to standard economic principles, retail prices should reflect wholesale market costs. However, it seems that companies are aligning their prices with the standard rate, which is already inflated by approximately 73% above the wholesale price.
The research team found that the median retail choice offer from competing companies is 98% higher than the wholesale cost of electricity.
Also, customers do not always have access to the best prices. The cost-saving offers were only available between 43% and 59% of the days of the year.
Prof. Dormady said:
“Even if consumers shopped for the best prices on electricity every day – which most people are not going to do – they would only find savings about half the time.”
Future Studies
According to Prof. Dormady, future studies will focus on the issues that consumers face when shopping around for retail electricity more thoroughly.
The current setup is overly complex for most residents, making it difficult for them to determine which deals are best.
The answer is not to return to a regulated system, despite the current issues with the electricity market, say the researchers. It would not lead to the best outcomes for consumers.
What the market needs is more efficiency and greater transparency. The authors suggest creating an Office of the Independent Market Monitor, which would make sure that the markets operated efficiently.
While Ohio’s Public Utilities Commission and the Consumers’ Counsel serve important roles, their multiple responsibilities mean they cannot substitute for a dedicated independent market monitor. According to Dormady, independence and specialized electricity market expertise are essential.
The researchers also suggest establishing a “supplier scorecard” that gives each competing electricity supplier a rating for quality and competitiveness. The scorecard could function similarly to a Fitch, Moody’s, or Better Business Bureau rating.
Prof. Dormady said:
“We need to make it easier for consumers to identify the electricity offers that will save them money and that are right for them. Unfortunately, it is too easy to confuse consumers in a complex market like this.”
The Alfred P. Sloan Foundation supported the study.
Citation
Dormady, N., Welch, W., Ji, Y., Pedron, S., Shafieezadeh, A., Lamadrid, A., Hoyt, M., & Fox, S. (2025). Efficiency and consumer welfare under retail electricity deregulation: Analysis of Ohio’s retail choice markets. Journal of Critical Infrastructure Policy, 6(1), e12031. https://doi.org/10.1002/jci3.12031
