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Even with broad societal pressures to alter the regulatory environment in the states with regard to the efficient use of electricity, many states have not made what some conservation advocates believe are adequate reforms for increasing levels of energy efficiency. While some states have comprehensive policies that require electric utilities to engage in integrated resource planning and demand-side management (DSM), along with providing utilities with a regulatory framework that allows for the recovery of energy efficiency program costs and lost revenues, other states have no such policies. The main purpose of this inquiry is twofold: first, it discusses some of the current regulatory issues being explored at the state level in an attempt to determine how states vary in their development and application of energy efficiency regulations; and second, it attempts to explain why the states differ in their development of energy efficiency regulations. The application of the analytical framework developed in this study proves useful for assessing the various elements that affect state regulatory policy development. Organized interests, state political culture, and various state economic variables tend to exert considerable influence over regulatory policy choice. However, other factors such as government institutions, including state legislatures and regulatory agencies, were not without effect. Though the directions of some of the relationships were unexpected, various logistic regression models show that each of the approaches to the study of regulation is useful in explaining the process of developing and adopting innovative energy efficiency policies. In the area of electric utility regulation, and more specifically energy efficiency regulation, this analysis finds that, in general, the likelihood of a state adopting DSMrelated lost revenue recovery and/or shareholder incentives on DSM programs, as well as stringent cost-effectiveness tests, is greater for states with Republican governors. Democratic and professionalized legislatures, dominant interest groups, higher levels of GSP, greater growth in per capita personal income, traditionalistic political cultures, and lower levels of environmental commitment. Moreover, economics is not always the most influential factor in determining regulatory policy. Rather, political institutions and government bureaucracies make a considerable difference.