Non-Discrimination Clauses in the Retail Energy Sector

Authors


  •  Corresponding author: Catherine Waddams Price, Norwich Business School and ESRC Centre for Competition Policy, University of East Anglia, Norwich NR4 7TJ UK. E-mail: c.waddams@uea.ac.uk.

  • We gratefully acknowledge the financial support of the UK Economic and Social Research Council (ESRC). We thank two anonymous referees, participants in a UEA Energy Seminar, the University of California Energy Institate 2009 summer camp, the Regulatory Competition and Regulation Conference at Oxford, The NMa in the Hague, the CIE conference at Copenhagen, the World Forum on Energy IV, the Electricity Policy Research Group Winter Research Seminar at Cambridge, the Centre for Consumers and Essential Services conference at the University of Leicester, The Ankara Bar Association conference, The Spanish Energy Economists Association, The Economic and Social Research Institate in Dublin, the CCP and RPI joint conference on ‘The Role of Competition in Public Policy’ and the 2010 RES conference, as well as Zhijun Chen, Greg Shaffer, Mike Waterson and colleagues at CCP for many helpful comments and discussions; Hieu Tran and Oindrila De for excellent research assistance; and the Office of Gas and Electricity Markets for constructive debate and helpful information. The usual disclaimer applies.

Abstract

The British energy regulator has recently reviewed a non-discrimination licence condition imposed to ensure that energy retailers charge the same mark-up in different regions. Loyalty by many to incumbent firms necessitated heavy discounting by entrants to attract customers, which had led to regional price discrimination. Matching characteristics of the energy market to models of discrimination, we identify the necessary conditions for the licence condition to have a positive effect for consumers, and particularly ‘vulnerable’ consumers. The licence condition is likely to have reduced competition in the mainstream energy markets, which seems confirmed by the regulator's subsequent review of the retail market.

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