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Charges, Costs and Market Power: the Deregulated UK Electricity Retail Market

Evens Salies and Catherine Waddams Price

Year: 2004
Volume: Volume 25
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No3-2
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Abstract:
The residential UK electricity market was opened for the first time in 1999, introducing choice of supplier, and about 40 percent of households changed supplier in the first four years. After three years price caps were removed. We review this process and assess the competitiveness of the market by examining how the charges levied by suppliers depend on cost and demand factors for three different payment methods and consumption levels. We also identify signs of additional market power of incumbency and the effect of levying a tariff with no fixed charge. We find that both cost and demand factors affect charges, and the relationship varies for different payment methods and consumption levels; and that tariffs with no fixed element have different effects for different payment methods. We also conclude that considerable market power seems to remain with potentially adverse distributional effects.



Measuring Potential Gains from Mergers among Electricity Distribution Companies in Turkey using a Non-Parametric Model

Necmiddin Bagdadioglu, Catherine Waddams Price, Thomas Weyman-Jones

Year: 2007
Volume: Volume 28
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-4
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Abstract:
Turkish electricity reform is entering a new phase through the Turkish Government�s proposal to create 21 new distribution companies, 18 of them by merger. Two aspects of merger analysis are the operational cost savings and the potential production efficiency gains. This paper concentrates on the second aspect and uses a recently developed methodology to assess the potential effect of these mergers and whether these mergers are efficiency enhancing. This is performed by comparing the actual efficiency levels of observed distribution companies with the merger of proposed aggregated companies. The model is calibrated on panel data from 1999 to 2003 which include measures of physical capital and labor inputs, as well as customer and energy related outputs. The results indicate potential for considerable efficiency gains from the proposed mergers.



The Future of Retail Energy Markets

Catherine Waddams Price

Year: 2008
Volume: Volume 29
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-7
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Abstract:
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



Nonlinear Pricing and Tariff Differentiation: Evidence from the British Electricity Market

Stephen Davies, Catherine Waddams Price, and Chris M. Wilson

Year: 2014
Volume: Volume 35
Number: Number 1
DOI: 10.5547/01956574.35.1.4
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Abstract:
Liberalisation of the British household electricity market, in which previously monopolised regional markets were exposed to large-scale entry, is used as a natural experiment on oligopolistic nonlinear pricing. Each oligopolist offered a single two-part electricity tariff, but inconsistent with current theory, the two-part tariffs were heterogeneous in ways that cannot be attributed to explanations such as asymmetric costs or variations in brand loyalty. Instead, the evidence suggests that firms deliberately differentiated their tariff structures, resulting in market segmentation according to consumers' usage.



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

Catherine Waddams Price and Minyan Zhu

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.cpri
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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.



The Role of Attitudes and Marketing in Consumer Behaviours in the British Retail Electricity Market

Miguel Flores and Catherine Waddams Price

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.mflo
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Abstract:
We examine characteristics associated with consumer (dis)engagement in the residential electricity market, a topic of increasing policy interest and intervention, introducing consumer attitudes and marketing recall as new factors. General attitudes are closely associated with electricity market activity, with considerable variation in the strength and statistical significance of these relationships, indicating very different motivations amongst consumers. Recall of direct marketing routes has little identifiable effect, while advice of family and friends is influential. We identify implications for communication by both suppliers and policy makers seeking to improve the functioning of such markets, including the necessity for a variety of approaches.



Switching Energy Suppliers: It’s Not All About the Money

David Deller, Monica Giulietti, Graham Loomes, Catherine Waddams Price, Anna Moniche, and Joo Young Jeon

Year: 2021
Volume: Volume 42
Number: Number 3
DOI: 10.5547/01956574.42.3.ddel
View Abstract

Abstract:
Many consumers do not take advantage of lower energy prices available in liberalized retail markets. We provide evidence to explain why consumers may leave substantial amounts of "money on the table" in this way. We observe real decisions made by over 7,000 consumers in a collective switching auction, supplemented by their responses to a survey. We identify factors which may inhibit switching and show that expectations of high switching rates in an unregulated market may be unrealistic. Our findings have important implications for the design and regulation of energy markets, including imposition of price caps on "default" retail tariffs in 2019 in the UK and parts of Australia.





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