For businesses, electricity is easy to think of as a fixed overhead expense. The lights need to stay on, equipment needs to run, computers need power, and air conditioning becomes non-negotiable during a California summer.
But the cost of doing all of that can vary dramatically depending on where a company operates.
California offers one of the clearest examples. According to the U.S. Energy Information Administration, the average commercial electricity price in California was 25.11 cents per kilowatt-hour through May 2026. The national commercial average over the same period was 13.79 cents.
That means California businesses were paying, on average, about 82% more per kilowatt-hour than the national commercial average.
For companies with substantial electricity consumption, that gap can turn energy from a routine utility bill into a meaningful operating-cost consideration.
It also highlights a larger issue for businesses with locations across the United States: electricity markets do not work the same way everywhere.
Electricity Depends on Where You Do Business
Businesses generally think about location in terms of labor costs, rent, taxes, transportation, and access to customers. Increasingly, energy deserves a place on that list as well.
The difference is not simply that electricity costs more in one state than another. Businesses may also have different options for how they purchase the electricity itself.
California does provide forms of retail electricity choice. Community Choice Aggregators can procure electricity for customers in participating jurisdictions, while the state’s Direct Access program allows certain non-residential customers to purchase electricity from competitive Electric Service Providers.
However, Direct Access is subject to participation limits, meaning California does not offer the same broad retail electricity shopping environment found in some other states.
Compare that with Pennsylvania.
Pennsylvania businesses operating in eligible utility territories can shop among competitive electricity suppliers rather than automatically relying on their utility’s default generation supply.
Pennsylvania Public Utility Commission data from February 2026 showed that 40.3% of the state’s commercial customers had switched to an alternative electricity supplier. Those customers represented 69% of commercial electricity load.
“Businesses often assume electricity works essentially the same way everywhere, but that isn’t the case,” said Adam Cain, VP of Growth Marketing at Power Target LLC, which owns and operates ElectricityRates.com. “Two companies can have similar facilities and similar electricity usage but have very different purchasing options simply because they’re operating in different states.”
Energy Choice Changes the Equation
In a competitive electricity market, changing suppliers does not mean changing the power lines, poles or infrastructure serving a business.
The local utility generally remains responsible for delivering electricity and maintaining the distribution system. What changes is the company supplying the generation portion of the electricity.
That separation creates another procurement decision for a business.
Instead of treating the utility’s default supply rate as the only available price, eligible companies may be able to compare competing suppliers, rates and contract structures.
Pennsylvania’s official PA Power Switch program, for example, allows businesses to review offers from electricity suppliers serving their area.
Companies such as ElectricityRates.com similarly help consumers and businesses understand Energy Choice and compare electricity plans in competitive markets. The platform has operated for more than a decade and provides rate-comparison tools and energy information for markets including Pennsylvania, Ohio, Texas, Maryland and several other states.
That does not mean the lowest advertised rate should automatically win.
“Price is obviously important, but businesses should look beyond a single cents-per-kilowatt-hour number,” Cain said. “Contract length, whether a rate is fixed or variable, cancellation terms and what happens when a contract expires can all affect the value of an electricity plan.”
What Businesses Should Be Looking At
For companies operating in competitive electricity markets, electricity procurement can be approached much like other recurring business expenses.
One place to start is the utility’s “price to compare,” or equivalent default supply benchmark. This can provide a reference point when evaluating competitive offers.
Businesses should then consider several factors, including:
- Fixed versus variable pricing: A fixed-rate plan can provide greater price predictability, while variable rates can change with market conditions.
- Contract length: A lower rate may come with a longer commitment, so businesses should understand how that contract aligns with their plans.
- Early termination provisions: Companies that expect to relocate, expand or change facilities should pay attention to cancellation terms.
- Renewal terms: A competitive introductory rate does not necessarily remain in place indefinitely.
- Usage patterns: A warehouse, retail store, restaurant and office may use electricity very differently. Businesses should evaluate offers in the context of their actual consumption.
- Renewable energy options: Some suppliers offer plans with differing renewable-energy content, which may matter to companies with sustainability commitments.
For larger businesses, even relatively small differences in electricity costs can become significant when multiplied across substantial annual consumption.
A Lesson for California Companies With Operations Elsewhere
This is where the issue becomes particularly relevant to California’s business community.
A company headquartered in California may not have the same electricity-purchasing options at its headquarters as it does at facilities elsewhere.
Consider a business based in Los Angeles that also operates a distribution center in Pennsylvania, an office in Ohio or a facility in Texas. Treating electricity procurement identically across all locations could mean overlooking options that are available in one market but not another.
Pennsylvania provides a useful comparison.
According to U.S. Energy Information Administration data through May 2026, Pennsylvania’s average commercial electricity price was 14.12 cents per kilowatt-hour, compared with 25.11 cents in California. Electricity prices are influenced by many factors, and those statewide averages do not represent the rate every individual business pays. Still, the difference illustrates just how much geography can affect energy economics.
It also helps explain why businesses should understand not only what electricity costs in a particular market, but how that market is structured.
“Energy should be part of the conversation whenever a company is evaluating operating costs across locations,” Cain said. “In states where businesses have Energy Choice, knowing that you can shop and understanding how to compare plans gives you another lever to manage an expense that every company has.”
Electricity Is No Longer Just a Utility Bill
California’s electricity market presents its own unique challenges and opportunities, and businesses in the state have a range of strategies available to manage consumption and control costs.
The broader lesson extends far beyond California.
For companies with operations in multiple states, electricity should not necessarily be handled as a standardized national expense. Rates differ. Regulations differ. Supplier options differ.
In some markets, businesses have little direct control over who supplies their electricity. In others, they can actively compare providers and contract terms.
Knowing which situation applies is the first step.
As energy costs take up a larger share of attention in boardrooms and operating budgets, businesses may increasingly need to view electricity procurement the same way they view insurance, telecommunications, logistics and other major recurring expenses.
California’s high electricity costs make that lesson particularly visible. But for businesses operating in competitive electricity markets, the more important question may be whether they are taking advantage of the choices they already have.
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