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
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
An important step towards a completely new experimental access to quantum physics has been made at University of Konstanz. The team of scientists headed by...
Yersiniae cause severe intestinal infections. Studies using Yersinia pseudotuberculosis as a model organism aim to elucidate the infection mechanisms of these...
Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.
While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...
Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales
Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...
Among the general public, solar thermal energy is currently associated with dark blue, rectangular collectors on building roofs. Technologies are needed for aesthetically high quality architecture which offer the architect more room for manoeuvre when it comes to low- and plus-energy buildings. With the “ArKol” project, researchers at Fraunhofer ISE together with partners are currently developing two façade collectors for solar thermal energy generation, which permit a high degree of design flexibility: a strip collector for opaque façade sections and a solar thermal blind for transparent sections. The current state of the two developments will be presented at the BAU 2017 trade fair.
As part of the “ArKol – development of architecturally highly integrated façade collectors with heat pipes” project, Fraunhofer ISE together with its partners...
19.01.2017 | Event News
10.01.2017 | Event News
09.01.2017 | Event News
19.01.2017 | Earth Sciences
19.01.2017 | Life Sciences
19.01.2017 | Physics and Astronomy