Innovators and entrepreneurs are transforming the energy industry. From shale gas to electric vehicles to low-cost wind and solar, so much about the way Americans make and use energy is changing for the better. Yet regulations haven’t kept pace. Today a thicket of rules too often stymies innovation and damages the economy.

For example, about a third of the natural gas in the U.S. is used to make electricity, up from 20% in 2010, according to the U.S. Energy Information Administration. But regulations preclude efficient transactions...