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Non-discrimination Clauses: Their Effect on British Retail Energy Prices

Abstract:
UK governments and the energy regulator have shown increasing concern about the health of competition in the residential energy market, following their pioneering deregulation at the end of the last century. We identify the effects of introducing the non-discrimination clauses in 2009, a major regulatory intervention and the first since deregulation. We explore the effect of this intervention on the price movements of the six major players, and find that the nature of competition in the industry has changed, with less effective rivalry between the regional incumbents and large regional competitors following the intervention; companies seem to have 'retreated' to their home regions, leaving a market where pricing behaviour resembles more closely a duopoly between British Gas and the regional incumbent.

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Energy Specializations: Energy Investment and Finance – Public and Private Risks, Risk Management; Electricity – Generation Technologies; Electricity – Local Distribution; Petroleum – Markets and Prices for Crude Oil and Products; Natural Gas – Markets and Prices; Energy Investment and Finance – Other

JEL Codes:
D81 - Criteria for Decision-Making under Risk and Uncertainty
Q2 -
D44 - Auctions
L13 - Oligopoly and Other Imperfect Markets
G39 - Corporate Finance and Governance: Other

Keywords: Regulation, Energy, Non-discrimination, Vector Autoregressive Model

DOI: 10.5547/01956574.37.2.cpri

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Published in Volume 37, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.