From from the Nicholas Institute for Energy, Environment, and Sustainability @ Duke University
The power sector faces intersecting challenges: surging electricity demand, rising customer costs, the imperative to decarbonize the grid and robust public interest in more competition.
A new report from Duke University’s Nicholas Institute for Energy, Environment & Sustainability outlines state competitiveness policies that broaden market participation and realign utility incentives to better address these challenges in the southeastern United States.
The report defines power sector competitiveness as institutional and market arrangements that enable broad provider participation, distribute decision-making authority and market influence across a wide set of actors and expand meaningful customer choice. Analysis conducted for the report utilizes data from the Nicholas Institute’s Southeast Power Sector Competitiveness Dashboard, which evaluates 12 states in the region across 15 policy indicators.
The report identifies specific policy reforms to increase competitiveness in a region historically dominated by vertically integrated utilities and some of the highest concentrations of generation markets in the country. Key findings include:
1. Power sector competitiveness in the Southeast is not binary; it exists on a continuum. Competitiveness can be strengthened even in the absence of full market restructuring or participation in regional transmission organizations (RTOs). Some states are already implementing selective competitiveness policies, showing that incremental reform is possible. New technological solutions and regulatory innovations make competitiveness a dynamic area with widening opportunities, but more state-level assessment of the potential benefits is needed across the Southeast.
2. Competitiveness is best characterized as a three-dimensional framework. Competitiveness reflects governance choices across interconnected dimensions. States can advance competitiveness by targeting reforms in one or more of these dimensions:
- Consumer: The extent of meaningful customer choice and customer-facing offerings
- Structure: Utility incentives, cost recovery rules, procurement practices and regulatory oversight
- Regional market: Coordination among utilities and participation in independent regional markets
3. Even narrow forms of consumer choice can attract investment, expand access to renewable energy and introduce increased cost discipline. Tools such as utility green tariffs, third-party power purchase agreements and even partial retail competition for large customers offer pragmatic entry points for incremental reform.
4. Realigning utility incentives can help overcome structural impediments to competition in the region. Performance-based regulation shows promise in some states by linking utility revenue with outcomes such as affordability, reliability and service quality. The report also points to competitive procurement processes and strong consumer advocacy institutions as areas with structural opportunity.
5. Enhanced regional coordination offers large potential gains, even without full market competitiveness. While Arkansas, Louisiana, Virginia and West Virginia already substantially participate in RTOs, much of the Southeast remains outside these systems. Limited regional market participation reduces opportunities for efficient electricity generation, cost savings and improved reliability. Intermediate options, such as energy imbalance markets and independent dispatch platforms, could prove politically viable while yielding meaningful benefits.
“Building on previous Nicholas Institute research, this report highlights steps that states in the Southeast can take to advance competitiveness,” said lead author Eric Parajon, a Nicholas Institute senior policy analyst. “Many of these reforms are incremental, but they can help lower costs, expand consumer choice and support economic development without requiring major changes to the region’s existing electricity system.”
The report was authored by three Nicholas Institute experts: Parajon; Trey Gowdy, a senior policy researcher; and Jackson Ewing, director of energy and climate policy.
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Parajon, E., T. M. Gowdy, and J. Ewing. 2026. Encouraging or Impeding Power Sector Competitiveness: Utility Incentives and Regulatory Policies in the Southeastern US and Beyond. NI 26-10. Durham, NC: Nicholas Institute for Energy, Environment & Sustainability, Duke University. https://nicholasinstitute.duke.edu/publications/encouraging-or-impeding-power-sector-competitiveness.