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Competition, regulation and price controls in the GB retail energy market

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  • Littlechild, Stephen

Abstract

After 2008 Ofgem increasingly intervened in the GB domestic (residential) retail energy market. The Competition and Markets Authority (CMA) found that ‘weak customer response’ gave the major suppliers market power, which they used to set excessive prices and to discriminate against less engaged customers. The CMA quantified the customer detriment at an average of £1.4bn per year. In 2018 the Government proposed that Ofgem impose a widespread price cap. This paper explains the evolution of this policy then challenges the Ofgem and CMA analyses. Despite a concern about price differentials, especially involving vulnerable customers, there is not a competition problem.

Suggested Citation

  • Littlechild, Stephen, 2018. "Competition, regulation and price controls in the GB retail energy market," Utilities Policy, Elsevier, vol. 52(C), pages 59-69.
    • Handle: RePEc:eee:juipol:v:52:y:2018:i:c:p:59-69
    DOI: 10.1016/j.jup.2018.04.007
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    References listed on IDEAS

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    1. Stephen Littlechild, 2014. "Promoting or restricting competition?: Regulation of the UK retail residential energy market since 2008," Cambridge Working Papers in Economics 1441, Faculty of Economics, University of Cambridge.
    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.
    4. Brennan, Timothy J., 2007. "Consumer preference not to choose: Methodological and policy implications," Energy Policy, Elsevier, vol. 35(3), pages 1616-1627, March.
    5. Stephen Littlechild, 2014. "The competition assessment framework for the retail energy sector: some concerns about the proposed interpretation," Working Papers EPRG 1406, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
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    Citations

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    Cited by:

    1. Stagnaro, Carlo & Amenta, Carlo & Di Croce, Giulia & Lavecchia, Luciano, 2020. "Managing the liberalization of Italy's retail electricity market: A policy proposal☆," Energy Policy, Elsevier, vol. 137(C).
    2. Abdullahi Ahmed Umar & Kabiru Goje & Mahadi Ahmad, 2023. "Combating Rising Energy Poverty with Sunnah-Compliant Orthodox Sukuk Finance," JRFM, MDPI, vol. 16(10), pages 1-19, October.
    3. Paul Simshauser, 2022. "The 2022 energy crisis: horizontal and vertical impacts of policy interventions in Australia's national electricity market," Working Papers EPRG2216, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Paul Simshauser, 2021. "Vulnerable households and fuel poverty: policy targeting efficiency in Australia’s National Electricity Market," Working Papers EPRG2108, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Younes Zahraoui & Tarmo Korõtko & Argo Rosin & Hannes Agabus, 2023. "Market Mechanisms and Trading in Microgrid Local Electricity Markets: A Comprehensive Review," Energies, MDPI, vol. 16(5), pages 1-52, February.
    6. Simshauser, Paul, 2023. "The 2022 energy crisis: Fuel poverty and the impact of policy interventions in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 121(C).
    7. Stephen Littlechild, 2019. "Promoting competition and protecting customers? Regulation of the GB retail energy market 2008–2016," Journal of Regulatory Economics, Springer, vol. 55(2), pages 107-139, April.
    8. Goodell, John W. & Gurdgiev, Constantin & Paltrinieri, Andrea & Piserà, Stefano, 2024. "Do price caps assist monetary authorities to control inflation? Examining the impact of the natural gas price cap on TTF spikes," Energy Economics, Elsevier, vol. 131(C).
    9. Simshauser, Paul, 2021. "Vulnerable households and fuel poverty: Measuring the efficiency of policy targeting in Queensland," Energy Economics, Elsevier, vol. 101(C).
    10. Mukherjee, Maitreyee & Jensen, Olivia, 2022. "Open Water: Impacts of Retail Competition on Service Performance and Water-Use Efficiency in England," Utilities Policy, Elsevier, vol. 79(C).
    11. Haar, Lawrence, 2021. "The competitive disadvantages facing British assetless electricity retailers," Energy Policy, Elsevier, vol. 155(C).
    12. Muyi Yang & Yuanying Chi & Kristy Mamaril & Adam Berry & Xunpeng Shi & Liming Zhu, 2020. "Communication-Based Approach for Promoting Energy Consumer Switching: Some Evidence from Ofgem’s Database Trials in the United Kingdom," Energies, MDPI, vol. 13(19), pages 1-16, October.

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