Utility deregulation has been the focus of research examining the role of policy diffusion in state policy innovation. In this study, a model of policy innovation is employed to determine the factors that influence the probability of a state restructuring its electric utility policies. Examined are the effects of industrial: residential price ratio disparities, the relative cost of energy in each state, the selection process of public utility commissions, legislative professionalism, the partisanship of state legislatures, interest group influences, and regional diffusion on the likelihood of a state adopting energy deregulation policies. The findings indicate that economic factors determine the policy choices of state legislatures. The policy diffusion model generally is sustained even though, in retrospect, the policy of deregulation of the electric industry generally has been considered to be a failure.