Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

New Research says Electricity customers not seeing expected price benefits of competition

12.04.2007
New research by economists at the University of Warwick, Aston Business School and the Universidad del Rosario Columbia, reveals that electricity customers are not seeing expected price benefits of increased competition and internet price searches in the sector.

The new research is in a paper entitled “Pricing behaviour under competition in the UK electricity supply industry” to be delivered at the Royal Economic Society Annual Conference at the University of Warwick on Thursday 12th April. The researchers looked at prices offered by each of the 6-18 firms active in the domestic electricity market from February 1999 to December 2006. The data was obtained from the Consumer’s Association, OFGEM and Energywatch.

The researchers noted that there were a number of factors in that period that would lead one to expect that customers would benefit from low prices and that there would be low differentials in prices between companies:

- Increased use of the internet by customers to provide price comparisons

- Increased competition between suppliers. In particular new suppliers entering the market place and attempting to take market share by offering prices well below the incumbent suppliers

- Easy mechanisms allowing switching between suppliers.

Surprisingly the researchers found that incumbent suppliers’ electricity prices were much more resistant to change and remained at higher levels than expected. These high incumbent prices also appeared to make it worthwhile for new suppliers entering the market to quote, and do business at, prices that were significantly noncompetitive.

The researchers also found that over the period of study retail electricity prices overall did not fall to the extent of price falls in wholesale prices over the period since a market has developed (OFGEM, 2003).

The researchers further found that if anything the variation in prices being offered between one supplier and another increased over the period of study. High energy users paying by direct debit saw the range of price offerings by non-incumbent suppliers increasing to 30% of the bill, for example. Low energy users paying by direct debit saw an even larger range, up to 35%.

In examining what factors could have produced these surprising results Professor Waterson from the University of Warwick said: “This confirms past studies which have shown that some consumers remain reluctant to switch, even in the face of substantial financial benefits. Incumbent electricity suppliers can therefore charge a premium over new suppliers without losing all of their custom. Moreover, it is important to be careful in choosing an alternative supplier, because it is perfectly possible to switch and yet be worse off, if you choose at random.”

The research team also noted that while fast and increased internet access brings with it the possibility that a large proportion of consumers might avail themselves of the opportunity to compare prices on line and switch to another company there is little evidence that this is a sufficiently widespread practice to have a large effect. Past studies show that although the proportion of searchers using the internet specifically for this purpose has increased, it is still a minority method of gaining information on electricity price offers compared, for example, with information gathered from a representative who calls at the consumer’s home (according to an OFGEM report from 2004).

Peter Dunn | alfa
Further information:
http://www.warwick.ac.uk

More articles from Business and Finance:

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Breakthrough with a chain of gold atoms

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

Im Focus: DNA repair: a new letter in the cell alphabet

Results reveal how discoveries may be hidden in scientific “blind spots”

Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...

Im Focus: Dresdner scientists print tomorrow’s world

The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.

The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...

Im Focus: Mimicking nature's cellular architectures via 3-D printing

Research offers new level of control over the structure of 3-D printed materials

Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...

Im Focus: Three Magnetic States for Each Hole

Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".

Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Booth and panel discussion – The Lindau Nobel Laureate Meetings at the AAAS 2017 Annual Meeting

13.02.2017 | Event News

Complex Loading versus Hidden Reserves

10.02.2017 | Event News

International Conference on Crystal Growth in Freiburg

09.02.2017 | Event News

 
Latest News

Switched-on DNA

20.02.2017 | Materials Sciences

Second cause of hidden hearing loss identified

20.02.2017 | Health and Medicine

Prospect for more effective treatment of nerve pain

20.02.2017 | Health and Medicine

VideoLinks
B2B-VideoLinks
More VideoLinks >>>