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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



Why Consumers Switch Energy Suppliers: The Role of Individual Attitudes

Xiaoping He and David Reiner

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: https://doi.org/10.5547/01956574.38.6.hxia
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Abstract:
Since 2008, fewer customers switched suppliers in British electricity and gas markets despite the potential for financial gains, suggesting that psychological factors may affect switching behaviors. Using a unique nation-wide British survey, we explore the influence of consumers' attitudes and perceptions on switching behaviors and assess the differences in switching propensity across different groups. Support for simplifying energy tariffs, professed less difficulty in understanding energy bills, expected difficulty in changing suppliers and lack of attention to the issue of energy prices are associated with lower switching activity. At a time of high saliency, political party voting intention was strongly related to switching. Unlike the bivariate analyses conducted by the regulator and the competition authority, our multivariate analysis show few demographic factors affect the likelihood of switching except for educational attainment and tariff payment patterns. Remedies aiming to encourage switching cannot be targeted correctly unless the supporting analysis is robust to alternative model specifications.





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