IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpio/0406003.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0406/0406003.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
    2. Otero, Jesus & Waddams Price, Catherine, 2001. "Price Discrimination, Regulation and Entry in the UK Residential Electricity Market," Bulletin of Economic Research, Wiley Blackwell, vol. 53(3), pages 161-175, July.
    3. ., 1998. "Stationary State," Chapters, in: Heinz D. Kurz & Neri Salvadori (ed.),The Elgar Companion to Classical Economics, volume 0, chapter 127, Edward Elgar Publishing.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    5. Catherine Waddams & Ruth Hancock, 1998. "Distributional effects of liberalising UK residential utility markets," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 295-319, August.
    6. Monica Giulietti & Catherine Waddams Price & Michael Waterson, 2005. "Consumer Choice and Competition Policy: a Study of UK Energy Markets," Economic Journal, Royal Economic Society, vol. 115(506), pages 949-968, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Du, Limin & Mao, Jie & Shi, Jinchuan, 2009. "Assessing the impact of regulatory reforms on China's electricity generation industry," Energy Policy, Elsevier, vol. 37(2), pages 712-720, February.
    2. Nils-Henrik M. von der Fehr & Petter Vegard Hansen, 2010. "Electricity Retailing in Norway," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-46.
    3. Pollitt, Michael, 2009. "Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market," Utilities Policy, Elsevier, vol. 17(1), pages 13-23, March.
    4. Tao Chen & Qais Alsafasfeh & Hajir Pourbabak & Wencong Su, 2017. "The Next-Generation U.S. Retail Electricity Market with Customers and Prosumers—A Bibliographical Survey," Energies, MDPI, Open Access Journal, vol. 11(1), pages 1-17, December.
    5. repec:dau:papers:123456789/11029 is not listed on IDEAS
    6. Evens Salies, 2008. "Mergers in the GB electricity market: effects on retail charges," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1483-1490.
    7. 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.
    8. 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.
    9. Swadley, Adam & Yücel, Mine, 2011. "Did residential electricity rates fall after retail competition? A dynamic panel analysis," Energy Policy, Elsevier, vol. 39(12), pages 7702-7711.
    10. Littlechild, Stephen, 2006. "Competition and contracts in the Nordic residential electricity markets," Utilities Policy, Elsevier, vol. 14(3), pages 135-147, September.
    11. Amountzias, Chrysovalantis & Dagdeviren, Hulya & Patokos, Tassos, 2017. "Pricing decisions and market power in the UK electricity market: A VECM approach," Energy Policy, Elsevier, vol. 108(C), pages 467-473.
    12. Li, Weilin & Xu, Peng & Lu, Xing & Wang, Huilong & Pang, Zhihong, 2016. "Electricity demand response in China: Status, feasible market schemes and pilots," Energy, Elsevier, vol. 114(C), pages 981-994.
    13. repec:spo:wpecon:info:hdl:2441/7068 is not listed on IDEAS
    14. Catherine Waddams Price and Minyan Zhu, 2016. "Non-discrimination Clauses: Their Effect on British Retail Energy Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    15. Evens SALIES, 2005. "The effect on retail charges of mergers in the GB electricity market," Econometrics 0506001, University Library of Munich, Germany.
    16. Brown, David P. & Eckert, Andrew, 2018. "The effect of default rates on retail competition and pricing decisions of competitive retailers: The case of Alberta," Energy Policy, Elsevier, vol. 118(C), pages 298-311.
    17. 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.
    18. Nikogosian, Vigen & Veith, Tobias, 2011. "Strategic pricing, market entry and competition: Evidence from German electricity submarkets," ZEW Discussion Papers 11-068, ZEW - Leibniz Centre for European Economic Research.
    19. 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.
    20. Matsukawa, Isamu, 2019. "Detecting collusion in retail electricity markets: Results from Japan for 2005 to 2010," Utilities Policy, Elsevier, vol. 57(C), pages 16-23.
    21. Zhou, Kaile & Yang, Shanlin, 2015. "Demand side management in China: The context of China’s power industry reform," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 954-965.
    22. 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.

    More about this item

    Keywords

    Electricity Retail; Market Power; Non-linear Tariffs;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0406003. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.