Utility deregulation is a very complicated controversial topic.
Historic operating condition of US power grid:
Large investor owned utilities had monopoly over production and distribution within their areas. Amount of generating capacity required was set by a regulatory body. Prices that could be charged were set by a regulatory body to allow a moderate profit. Any stupid moves by the power company were thus covered by future rate increases, barring some just hideously stupdendously insane mistakes that could not be justified.
Utilities were required to have a large amount of margin (~20%) for power fluctuations in the form of power plants sitting there idle most of the time. This provided great reliability but much wasted capital. In addition, the guaranteed profits and no competition led to very few radical innovations and a very cautious industry. Independent power producers were ata large disadvantage, because they could build a plant, and then the power company could refuse to let them use their wires, or would only pay a small fraction of what the new plant wanted for power.
So enter the “Magic of the market!”
Deregulation happened at different paces and in different ways in different states. Generally, the industry was broken up into power plants, transmission grids, and local distribution centers. And Thus Enron was born. Companies could be set up to buy power from a power plant at whatever rate they could get, negotiate transmission costs with the transmission companies, and then pay a fixed rate to the local distibrution company to get it to your house.
Power costs are really very nebulous things. A huge portion of your daily power bill goes towards paying of the plant that was built to supply you with power rather than the actual fuel spent to create the electricity. And many plants are sitting there idle or at part load. So a plant could decide that it is willing to sell power more cheaply to a trading firm if it can guarantee that it is able to sell all the power the plant can produce. Or so goes the argument in favor of deregulation.
But in my view, it is really a shell game. Traders are in there to make profits. The costs of any power plants built or fuel burned are eventually going to be born by the consumer no matter how it is juggled around. Far more paper trading has occurred than technical innovation. Any cost savings are going to be at the expense of maintaining a proper reserve, leading to artificial power shortages as seen in California, and brownouts as we get to the point where no-one wants to pay for the needed reserve.