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The Future of Retail Energy Markets

Britain was one of the first countries to introduce competition to retail energy markets in 1998; after a decade of choice, around half of its residential consumers have switched supplier. This paper presents evidence on consumer and supplier behaviour over the decade since the markets were opened to assess the success of the experience to date. The early debate about the value of extending choice to householders, in which David Newbery was amongst those who expressed doubts, remains to be resolved in an era of rising costs and increasing politicisation. While Britain has coped very well with wholesale market power, ending the domestic franchise and removing regulation from the retail supply margin has exposed households to considerable increases in those margins, as switching costs appear significant, and vertically integrated companies have been effective in exploiting their power. David Newbery, Market Design, EPRG working paper 0515 p.9, 2005

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Energy Specializations: Energy Modeling – Forecasting and Market Analysis; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
D4 -
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Retail energy markets, Electricity, compettion, residential consumer behavior, energy supplier behavior

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-7

Published in Volume 29, Special Issue #2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.