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

Author

Listed:
  • 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.

Suggested Citation

  • Evens SALIES & Catherine WADDAMS, 2004. "Charges, costs and market power in the deregulated UK electricity retail market," Industrial Organization 0406003, University Library of Munich, Germany.
    • 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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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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