Econonomics of Energy and Environmental Policy

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Energy Reforms and Consumer Prices in the EU over twenty Years

To what extent have the European households benefited from the energy reforms of the last two decades in the EU? The core ingredients of change have been, in different proportions and timing across countries: privatization of formerly state-owned enterprises, unbundling of networks, market liberalization and regulation. This paper summarizes some empirical findings of a team of researchers at the University of Milan about the impact of the reforms on energy prices (1990-2007) for EU-15 households. Econometric testing of the impact of the reforms (measured by OECD/ECTR scores) on prices of electricity and gas finds that public ownership of the incumbents is correlated with lower prices for households; unbundling per se has no statistically significant effect; the evidence about liberalization is mixed. Price inertia, sources of primary energy in electricity, and oil price in gas are still the core price determinants. Customers' satisfaction with prices confirms these findings. There is some evidence that consumers are subjectively happy with the opportunity to switch their electricity supplier, even if the objective evidence about the actual benefit of doing this is limited.
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JEL Codes:D02: Institutions: Design, Formation, Operations, and Impact, H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies, O13: Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products

Keywords: Electricity and Gas Reforms, Consumer Prices, European Union

DOI: 10.5547/2160-5890.3.1.mflo

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Published in Volume 3, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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