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Regulated and unregulated Nordic retail prices

  • Johnsen, Tor Arnt
  • Olsen, Ole Jess
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    Nordic residential electricity consumers can now choose among a number of contracts and suppliers. A large number of households have continued to purchase electricity from the incumbent supplier at default contract terms. In this paper, we compare the situation for such passive customers. Danish default prices are regulated whereas default prices in the other countries are unregulated. Systematic price differences exist among the Nordic countries. However, as wholesale prices sometimes differ the gross margin is a more relevant indicator. Regulated gross margins are lower in Denmark than in Sweden but higher than in Norway and Finland. Because of market design Norwegian default contracts are competitive whereas Swedish contracts provide the retailer with some market power. We interpret the low Finnish margins as a result of municipal retailers continuing traditional pricing from the monopoly period. Danish margins are higher than the competitive Norwegian margins but are earned from a much lower level of consumption. The annually margins earned per consumer are very close in the two countries, which indicates that the Danish regulation is achieving its objective of approaching competitive prices.

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    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 39 (2011)
    Issue (Month): 6 (June)
    Pages: 3337-3345

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    Handle: RePEc:eee:enepol:v:39:y:2011:i:6:p:3337-3345
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    1. von der Fehr, Nils-Henrik M. & Hansen, Petter Vegard, 2008. "Electricity Retailing in Norway," Memorandum 02/2009, Oslo University, Department of Economics.
    2. Littlechild, Stephen, 2006. "Competition and contracts in the Nordic residential electricity markets," Utilities Policy, Elsevier, vol. 14(3), pages 135-147, September.
    3. Paul L. Joskow, 2005. "Markets For Power In The United States - An Interim Assessment," Working Papers 0512, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    4. Littlechild, Stephen, 2009. "Retail competition in electricity markets -- expectations, outcomes and economics," Energy Policy, Elsevier, vol. 37(2), pages 759-763, February.
    5. Amundsen, Eirik S. & Bergman, Lars, 2007. "Integration of multiple national markets for electricity: The case of Norway and Sweden," Energy Policy, Elsevier, vol. 35(6), pages 3383-3394, June.
    6. Hogan, William W., 1994. "Efficient direct access: Comments on the California blue book proposals," The Electricity Journal, Elsevier, vol. 7(7), pages 30-41, September.
    7. Defeuilley, Christophe, 2009. "Retail competition in electricity markets," Energy Policy, Elsevier, vol. 37(2), pages 377-386, February.
    8. Ruff, Larry E., 1999. "Competitive Electricity Markets: One Size Should Fit All," The Electricity Journal, Elsevier, vol. 12(9), pages 20-35, November.
    9. Littlechild, Stephen C, 2003. "Wholesale Spot Price Pass-Through," Journal of Regulatory Economics, Springer, vol. 23(1), pages 61-91, January.
    10. Olsen, Ole Jess & Johnsen, Tor Arnt & Lewis, Philip, 2006. "A Mixed Nordic Experience: Implementing Competitive Retail Electricity Markets for Household Customers," The Electricity Journal, Elsevier, vol. 19(9), pages 37-44, November.
    11. Littlechild, S.C., 2000. "Why We Need Electricity Retailers: A Reply to Joskow on Wholesale Spot Price pass-through," Cambridge Working Papers in Economics 0008, Faculty of Economics, University of Cambridge.
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