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Charges, costs and market power in the deregulated UK electricity retail market

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Author Info

  • Evens SALIES

    (University of Perpignan & of Paris 1 - Panthéon Sorbonne)

  • Catherine WADDAMS

    (University of East Anglia)

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.

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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0406003.

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Length: 23 pages
Date of creation: 05 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpio:0406003

Note: Type of Document - pdf; pages: 23. To appear in The Energy Journal in July 2004 A .pdf version of this paper is available at
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Web page: http://128.118.178.162

Related research

Keywords: Electricity Retail; Market Power; Non-linear Tariffs;

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Cited by:
  1. Evens Salies, 2006. "Mergers in the GB electricity market: effects on retail charges," Documents de Travail de l'OFCE 2006-08, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Giulietti, Monica & Grossi, Luigi & Waterson, Michael, 2010. "Price transmission in the UK electricity market: Was NETA beneficial?," Energy Economics, Elsevier, vol. 32(5), pages 1165-1174, September.
  3. Chemla, Gilles & Porchet, Arnaud & Aïd, René & Touzi, Nizar, 2011. "Hedging and vertical integration in electricity markets," Economics Papers from University Paris Dauphine 123456789/11029, Paris Dauphine University.
  4. von der Fehr, Nils-Henrik M. & Hansen, Petter Vegard, 2008. "Electricity Retailing in Norway," Memorandum 02/2009, Oslo University, Department of Economics.
  5. Pollitt, M., 2007. "Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market," Cambridge Working Papers in Economics 0756, Faculty of Economics, University of Cambridge.
  6. Karakatsani, Nektaria V. & Bunn, Derek W., 2008. "Intra-day and regime-switching dynamics in electricity price formation," Energy Economics, Elsevier, vol. 30(4), pages 1776-1797, July.
  7. Aïd, René & Chemla, Gilles & Porchet, Arnaud & Touzi, Nizar, 2011. "Hedging and Vertical Integration in Electricity Markets," CEPR Discussion Papers 8313, C.E.P.R. Discussion Papers.
  8. Adam Swadley & Mine Yücel, 2011. "Did residential electricity rates fall after retail competition? a dynamic panel analysis," Working Papers 1105, Federal Reserve Bank of Dallas.
  9. Jennings, Mark G., 2013. "A smarter plan? A policy comparison between Great Britain and Ireland's deployment strategies for rolling out new metering technologies," Energy Policy, Elsevier, vol. 57(C), pages 462-468.
  10. Littlechild, Stephen, 2006. "Competition and contracts in the Nordic residential electricity markets," Utilities Policy, Elsevier, vol. 14(3), pages 135-147, September.
  11. Dupont, B. & De Jonghe, C. & Olmos, L. & Belmans, R., 2014. "Demand response with locational dynamic pricing to support the integration of renewables," Energy Policy, Elsevier, vol. 67(C), pages 344-354.
  12. Evens SALIES, 2005. "The effect on retail charges of mergers in the GB electricity market," Econometrics 0506001, EconWPA.

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