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Research Says Government Wrong to Lift Electricity Price Controls

New research by a team including Dr Monica Giulietti, Senior Research Fellow at the University of Warwick's Warwick Business School believes that, despite today's announcement on electricity price controls, that there is still not enough competition to lift price controls on electricity markets in Britain. She says:

"A majority of customers are willing to tolerate the incumbent's prices being substantially above entrants' prices. As a result, the market is unlikely to become very competitive unless people's views about reputation of the new suppliers change"

In a recent research paper - The Role of Consumers in Competition and Competition Policy -she points out the following limits to competition:

It is very difficult for Prepayment customers to make a saving by moving to another tariff. Prepayment meters are comparatively common in electricity; 15.6% of consumers had them in March 1999, coming predominantly from the “lower” social classes

While there are 20 listed electricity suppliers to final consumers not all operate in any one area.

All the suppliers expect some degree of shakeout to take place, resulting in a smaller group of survivors, but this has barely happened to date. The fact that many suppliers continue to operate indeed implies the market is not very competitive.

Further Information

Dr Monica Giulietti Centre for Management under Regulation Warwick Business School, University of Warwick Coventry CV4 7AL tel. 024 76528199 email: m.giulietti@warwick.ac.uk