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

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  • Evens Salies

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Catherine Waddams Price

    (Centre for Competition Policy - UEA - University of East Anglia [Norwich])

Abstract

The residential UK electricity market was opened for the first time in 1999, introducing choice of supplier, and about 40% 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.

Suggested Citation

  • Evens Salies & Catherine Waddams Price, 2004. "Charges, Costs and Market Power: the Deregulated UK Electricity Retail Market," SciencePo Working papers Main hal-01020109, HAL.
    • Handle: RePEc:hal:spmain:hal-01020109
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01020109
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    More about this item

    Keywords

    Energy retail; Pricing; Seemingly Unrelated Regression Equations;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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