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Pricing structure in the deregulated UK electricity market

Author

Listed:
  • Evens SALIES

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

  • Catherine Waddams

    (University of East Anglia)

Abstract

As residential energy markets open to competition, consumers can choose from a range of tariffs offered by different suppliers. We examine the relationship between the fixed charge levied on each consumer, and the variable charge per unit of energy used across all these tariffs. Data are the tariffs offered in April 2002 in the 14 electricity regions of Great Britain by seventeen suppliers, seven of whom operate nationally. Our analysis focuses on the revenue trade-off for the company. We identify the effect of payment method on the relationship between fixed and variable charge. We find significant effects of the distribution and transmission charges which the suppliers pay in each area, as well as the size of the market both by number of customers and area; and confirm that incumbents charge significantly more that entrants. We also find significant differences between the prepayment and credit tariffs.

Suggested Citation

  • Evens SALIES & Catherine Waddams, 2004. "Pricing structure in the deregulated UK electricity market," Industrial Organization 0406002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:0406002
    Note: Type of Document - pdf; pages: 24
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    References listed on IDEAS

    as
    1. Otero, Jesus & Waddams Price, Catherine, 2001. "Incumbent and entrant response to regulated competition: signaling with accounting costs and market prices2," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 209-223.
    2. Bennett, M & Cooke, D & Catherine Waddams-Price, 2002. "Left out in the cold? New energy tariffs, low-income households and the fuel poor," Fiscal Studies, Institute for Fiscal Studies, vol. 23(2), pages 167-194, June.
    3. 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.
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    6. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(1), pages 77-96.
    7. 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.
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    Cited by:

    1. Evens Salies, 2008. "Mergers in the GB electricity market: effects on retail charges," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1483-1490.
    2. repec:hal:spmain:info:hdl:2441/7068 is not listed on IDEAS
    3. repec:spo:wpmain:info:hdl:2441/7068 is not listed on IDEAS
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    5. repec:spo:wpecon:info:hdl:2441/7068 is not listed on IDEAS
    6. Evens SALIES, 2005. "The effect on retail charges of mergers in the GB electricity market," Econometrics 0506001, University Library of Munich, Germany.

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    More about this item

    Keywords

    Energy Competition; Non Linear Pricing; Simultaneous Equation Models;
    All these keywords.

    JEL classification:

    • L - Industrial Organization

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