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The CMA's assessment of customer detriment in the GB retail energy market

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  • Stephen Littlechild

    () (University of Birmingham, and Judge Business School, University of Cambridge)

Abstract

The Competition and Markets Authority (CMA) has recently investigated the GB energy market and found an Adverse Effect on Competition (AEC) in the retail market for domestic (residential) customers. It estimated the associated customer detriment to be an average of £1.4 billion per year over 2012-15, rising to almost £2 billion in 2015. Citing these figures, the Government has introduced a Bill to require the energy regulator Ofgem to impose a price cap on most domestic energy tariffs. The CMA’s calculation is unprecedented with respect to its nature, magnitude and policy impact. It has implications for the conduct of competition policy and beyond. This paper seeks to understand and appraise the nature of this calculation, and to question whether it is appropriate as a basis for future policy.
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Suggested Citation

  • Stephen Littlechild, 2017. "The CMA's assessment of customer detriment in the GB retail energy market," Working Papers EPRG 1703, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
  • Handle: RePEc:enp:wpaper:eprg1703
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    References listed on IDEAS

    as
    1. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
    2. Baldwin, Robert & Cave, Martin & Lodge, Martin, 2011. "Understanding Regulation: Theory, Strategy, and Practice," OUP Catalogue, Oxford University Press, edition 2, number 9780199576098.
    3. Greg Shaffer & Z. John Zhang, 2000. "Pay to Switch or Pay to Stay: Preference-Based Price Discrimination in Markets with Switching Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 397-424, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    retail energy markets; market power; efficient costs;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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